The denounment of Brian Hartzer and Lindsay Maxsted at Westpac over the millions of cases of money laundering bough forth a much needed discussion about

just who is accountable in a large company when such a systemic stuff-up occurs.

Through all the commentary in the media one particuarly stood out for me, that of Elizabeth Sheedy, a risk-management expert from Macquarie University.

She was quoted in the AFR on Friday 22 November:

...the principle underlaying the BEAR [Banking Executive Accountability Regime ] was 'if everyone is responsible, no one is responsible.

I've clearly tweaked this for my heading as I believe this is the situation we're now facing directly with Westpac and more broadly across corporate Australia, boards, senior executives and management.

For those you who don't live in Australia or don't follow the financial news Westpac – one of the Big 4 Australian banks – has been hit with 23 million (yes you read that right) breaches of the anti-money laundering laws, specifically failing or delaying to report 19.5 million transactions, failing to keep records of another 3.5 million transactions and failing to record the origin of another 10,500 international transactions. Money launderers heaven and even more worrying, Paedophile/child pornography heaven.

Is it any wonder that trust in companies is at an all time low when very few (and I mean less than perhaps two handfuls) of board members/senior executives have been held directly accountable for actions that are illegal, immoral, reprehensible or downright arrogant over the past 15-20 years.

Hartzer's explanation of what happened was the corporate equivalent of Prince Andrew's catastrophic hour long television interview.

He might as well have sat there and pointed his fingers in opposite directions and said nothing.

He talked about being surprised at the allegations but did not say sorry.

Instead what we got was a masterclass in corporate speak...it may well win my Corporate Speak of the Year award.

Harzter noted the money laundering legislation had:

created a very large program of work that had increases or improvements in various processes and controls, and that the failure to identify the problem until last July [2018] was also a function in the turnover of the IT team.

There were a bunch of people [here he means Westpac employees and management by the way] who left the company from the product area that was over-seeing that. So we had a confluence of a program of work that was not well-managed from a project point of view – or from a technical point of view – compounded with a change in personnel. [This] meant they didn't quite understand what they had inherited and that this problem existed.

Well if they didn't why didn't he, the board and senior management?

That's a fundamental part of their jobs isn't it?

Talk about throwing a nameless bunch of people/personnel under a bus.

If everyone is responsible no one is accountable.

To explain this away as a rolling issue with software upgrades is disingenuous at best and corporate camouflage at next best.

Effectively Harzter pushed responsibility down the chain of command while defending the way the board and management handled, or didn't handle, these issues.

Separately, Harzter and the board have not addressed their decision to enter a range of agreements with overseas banks outside the global payments system known as SWIFT. One product called LitePay was touted by Westpac as a cheap way for customers to send up to $3,000 abroad to 22 countries including the Philippines for low fees. The product for these transfers was Australasian Cash Management where transfers were bundled into 'batches' that often lacked information about the payer or the payee.

There were inherent risks in bypassing the SWIFT system. The Board, senior management and specific executives would have explored these risks and made a judgement call that they were manageable. A nameless bunch of people/personnel didn't make this decision the Board and senior executives at the time did and continued to do so. And, apparently senior management at Westpac were specifically briefed on the risks relating to LitePay in June 2016!

As AUSTRAC has outlined:These contraventions are the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the board.

 

It hasn't been lost on some that the day AUSTRAC announced it's action against Westpac Satya Nadella, Microsoft's CEO was addressing a group of Australian business leaders about, wait for it, corporate responsibility, the pressing need for human oversight of artificial intelligence systems and how Microsoft has earned its social licence to operate.

I wonder if there were any Westpac board members or executives (past or present) in the room. I'd love to know.

Hartzer took issue with AUSTRAC's statement that senior executives and the board were 'indifferent'.

So Brian, what about the board and senior executives being accountable?